The monthly CommBank Household Spending Insights (HSI) Index fell 1.0 per cent in October, led by declines in spending across recreation, hospitality and food and beverage as the ongoing effect of interest rate rises continues to be felt on consumer spending.
Spending on essential goods and services was up 0.3 per cent, while spending on discretionary down -3.7 per cent.
Spending fell in seven of the CommBank HSI Index's 12 underlying categories, with the biggest falls across recreation (-4.7 per cent), hospitality (-4.5 per cent) and food and beverage (-1.3 per cent).
Weakness in these categories was partly offset by increased spending on utilities (+2.2 per cent) and Transport (+2.0 per cent) as households manage higher energy bill and petrol prices.
CBA Chief Economist Stephen Halmarick said: "October's CommBank HSI Index demonstrates a clear tightening in consumer spending compared to September's result, which was buoyed by a number of one-off events like the FIFA Women's World Cup.
"We are clearly seeing the flow on effects of the interest rate increases from earlier in the year.
"Last week's decision from the RBA to raise the case rate by a further 25 basis points, to 4.35%, is likely to add further downward pressure to household spending over coming months. However, November will be an interesting one to watch with potential increases in spending due to the November sales.
"Looking ahead, our base case is no further increases in the RBA cash rate, although there remains upside risk based on the inflation figures due at the end of January."
The CommBank HSI index - which tracks month on month data at a macro level and is based on de-identified payments data from approximately 7 million CBA customers, comprising roughly 30 per cent of all Australian consumer transactions - also showed sharp differences among certain states and territories.
The Northern Territory saw the strongest growth in household spending in October, up 1.1 per cent, followed by Tasmania (0.5 per cent).
"There is a clear East versus West divide, with New South Wales and Victoria the weakest of the states, likely driven by how highly leveraged these states are," commented Mr Halmarick. Victoria saw a large decline in spending in October down 1.5 per cent for the month, while New South Wales fell -0.9 per cent.
October's HSI data has been refined to more accurately capture household spending, removing some categories that relate to investments and incorporating Buy Now Pay Later data, to provide a more complete picture of household spending in the Australian economy.
Things you should know: NOT INVESTMENT RESEARCH. The Commonwealth Bank 'Household Spending Insights' is not investment research and nor does it purport to make any recommendations. The Commonwealth Bank 'Household Spending Insights' has been prepared without taking into account your objectives, financial situation (including your capacity to bear loss), knowledge, experience or needs. You should not act on the information contained in this document. To the extent that you choose to make any investment decision after having read this document, you should not rely on it but consider its appropriateness and suitability to your own objectives, financial situation and needs, and, if appropriate, seek professional or independent financial advice, including tax and legal advice. The data used in the 'Commbank Spending Insights' series is a combination of CBA Data and publically available Australian Bureau of Statistics (ABS), CoreLogic and Reserve Bank of Australia data. Any reference made to the term 'CBA data' means the proprietary data of the Bank that is sourced from the Bank's internal systems and may include, but is not limited to, home loan data, credit card transaction data, merchant facility transaction data and applications for credit. All customer data used, or represented, in this report is de-identified before analysis and is used, and disclosed, in accordance with the Group's Privacy Policy. Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945
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